CNBC's Ron Insana: 'Pre-Emptive Strike' by Fed Wouldn't Help Economy

Friday, 22 Aug 2014 01:30 PM

By Dan Weil

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While some Federal Reserve officials have called for the central bank to raise interest rates sooner than most market participants expect, CNBC contributor Ron Insana says that would be a bad idea.

"Commodity prices have fallen sharply since the last Fed meeting, . . . housing is still struggling . . . and the global economy looks weaker than it did a month and a half ago," he writes on CNBC.com.

The labor market shows slack too, Insana says. Wages rose only 2 percent in the 12 months through July, and the labor participation rate hovers near a 36-year low.

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"It does not seem to me that, while the economy is much improved, a pre-emptive strike on phantom inflation would do the economy much good," Insana writes.

"I will make the bet that Fed rate hikes are still not coming until the second half of 2015." The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

Elsewhere, Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank may begin tightening monetary policy earlier than officials previously expected, while Atlanta Fed President Dennis Lockhart urged more patience.

“The evidence is leading toward an earlier increase than would have been in the works earlier this year,” Bullard told Bloomberg Radio. “Labor markets have improved quite a bit relative to what the committee was thinking.”

Lockhart, who spoke in a separate Bloomberg Radio interview Thursday, still warned of the risk of “moving prematurely and snuffing out some progress.”

Meanwhile, financial industry professionals give the Federal Reserve an approval rating of just 49 percent in a survey by ConvergEx Group brokerage. A total of 32 percent of the 219 people polled by ConvergEx Aug. 12-14 disapprove of the Fed's performance.

A total of 59 percent of respondents say the Fed is behind the curve in raising interest rates, while 32 percent say the Fed is getting it right, and 9 percent say rates should be lower.

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